INTERCREDITOR AGREEMENT
This Agreement is made as of April 22, 1999 by and between XXXXX FARGO
BUSINESS CREDIT, INC., f/k/a Norwest Business Credit, Inc. ("WFBCI"), and
WebBank Corporation ("WebBank").
WHEREAS, WFBCI has made and may in the future make advances and grant
other financial accommodations to Naco Industries, Inc., a Utah corporation (the
"Borrower") including without limitation advances and other financial
accommodations made in accordance with a Credit and Security Agreement and
certain documents executed in connection therewith, each dated as of April 22,
1999 between the Borrower and WFBCI, as the same may hereafter be amended,
supplemented or restated from time to time (the "WFBCI Credit Agreement"); and
WHEREAS, in connection with the WFBCI Credit Agreement, the Borrower
has granted to WFBCI a security interest (the "WFBCI Security Interest") in
substantially all of the Borrower's assets, including but not limited to all of
the Borrower's accounts receivable, equipment, inventory, general intangibles,
and all proceeds and products of the foregoing (collectively, the "Collateral").
Collateral as used herein specifically excludes real property owned by the
Borrower; and
WHEREAS, WebBank intends to provide the Borrower with a loan in the
amount of $1,100,000 (the "WebBank Loan") secured by certain equipment and real
property as set forth on Exhibit A attached hereto and incorporated herein (the
"WebBank Collateral") and in connection with such loan, WebBank desires to
acquire a security interest in the WebBank Collateral (the "WebBank Security
Interest"); and
WHEREAS, in accordance with the WFBCI Credit Agreement and the WebBank
Loan, the Borrower is proscribed from borrowing money from any person or
granting to any person a security interest in any of its assets without the
consent of WFBCI or WebBank, as the case may be, and breach of such covenants
would cause a default under the WFBCI Credit Agreement and the WebBank Loan, as
the case may be; and
WHEREAS, WFBCI is willing to consent to the WebBank Loan and the grant
by the Borrower of the WebBank Security Interest and WebBank is willing to
consent to the WFBCI Credit Agreement and the grant by the Borrower of the WFBCI
Security Interest, on the terms and subject to the conditions hereof;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and in consideration of the recitals, which are hereby
made a part of this Agreement, it is hereby agreed by the parties that:
1. Priorities. At all times, whether before, during or after the
pendency of any bankruptcy, reorganization or other insolvency proceeding, and
notwithstanding the actual priority of the perfected security interests, liens
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or other encumbrances of the respective parties, which any such party would
otherwise obtain over and by virtue of a prior filing or obtaining prior
possession of any collateral pledged by the Borrower in connection with the
WFBCI Credit Agreement or the WebBank Loan (if any such liens are perfected by
possession), the priority with respect to such security interests, liens or
other encumbrances will be as follows:
(a) As to the WebBank Collateral, the WebBank Security
Interest shall have priority over the WFBCI Security Interest and the WFBCI
Security Interest is hereby expressly subordinated thereto.
(b) As to the Collateral (exclusive of the WebBank
Collateral), the WFBCI Security Interest shall have priority over the WebBank
Security Interest and the WebBank Security Interest is hereby expressly
subordinated thereto.
(c) WFBCI specifically disclaims any right, title, security
interest, lien or encumbrance on any of the real property owned by the Borrower.
The subordinations and relative priority agreements set forth in this paragraph
1 are expressly conditioned upon the non-voidability and perfection of the
security interests described herein. If the security interest to which another
interest is subordinated is not perfected or is voidable for any reason, then
the subordination provided for herein shall not be effective as to that
particular part of the Collateral.
2. Collections. None of the parties hereto will (i) exercise any
collection rights with respect to any of the Collateral to the extent such party
has subordinated its interest in such Collateral pursuant to paragraph 1 hereof;
(ii) take possession of, sell or dispose of, or otherwise deal with such
Collateral; or (iii) exercise or enforce any right or remedy which may be
available to such party with respect to such Collateral upon default, without
the prior written consent of the party holding a senior security interest in
such Collateral pursuant to paragraph 1 above.
3. Perfection and Possession. Neither WFBCI nor WebBank (i) makes any
representation or warranty concerning the Collateral or the validity, perfection
or (except as to the subordination effected hereby) priority of any security
interest therein, or (ii) shall have any duty to preserve, protect, care for,
insure, take possession of, collect, dispose of or otherwise realize upon any of
the Collateral.
4. License to Use IP Collateral.
(a) Grant of Limited Non-Exclusive License to Sell Collateral.
WebBank hereby grants to WFBCI a limited non-exclusive license to use the IP
Collateral (as defined in Exhibit A hereto) upon the occurrence of any Event of
Default (as defined in the WFBCI Credit Agreement) for the exclusive purpose of
selling any of the Collateral. The license granted pursuant to this paragraph
4(a) shall expire 180 days after the date upon which all of the following are
satisfied: (a) WFBCI has completed manufacture of and taken possession of all
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Products, (b) any outstanding stay, injunction or other court order or process
has been lifted or terminated so that WFBCI has the legal ability to sell and
convey title of any and all Products, and (c) all steps necessary under WFBCI
Credit Agreement or law have been completed so that WFBCI has the immediate
right to sell and convey title to any and all Products.
(b) Grant of Limited Non-Exclusive License to Use Equipment
and to Manufacture. Upon and conditioned upon the payment to WebBank of the rent
pursuant to paragraph 7(b) hereof, WebBank agrees to grant to WFBCI a limited
non-exclusive license to use the IP Collateral to manufacture products produced
by the Borrower (the "Products") and to exercise all rights which the Borrower
or WebBank has in the IP Collateral, including without limitation, the rights to
complete the manufacture of any partially completed Products. The license
granted pursuant to this paragraph 4(b) shall expire upon WFBCI's termination of
rent payments to WebBank pursuant to paragraph 7(b) hereof or upon WFBCI's
failure to pay such rental payments when due.
5. Application of Proceeds of Collateral.
(a) Subject to the terms of the WFBCI Credit Agreement, in the
event of the repossession, sale, collection or other disposition of any of the
Collateral other than the WebBank Collateral, the proceeds thereof shall be
first applied in satisfaction of any indebtedness owing from the Borrower to
WFBCI that is secured by such Collateral, whether for principal, interest, fees,
expenses or otherwise; and when all such indebtedness owing to WFBCI shall have
been paid in full, any remaining proceeds of such Collateral shall be delivered
to WebBank to be applied against any indebtedness owing from the Borrower to
WebBank that is secured by such Collateral.
(b) Subject to the terms of the WebBank Loan, in the event of
the repossession, sale, collection or other disposition of any of the WebBank
Collateral, the proceeds thereof shall be first applied in satisfaction of any
indebtedness owing from the Borrower to WebBank that is secured by the WebBank
Collateral, whether for principal, interest, fees, expenses or otherwise; and
when all such indebtedness owing to WebBank shall have been paid in full, any
remaining proceeds of the WebBank Collateral shall be delivered to WFBCI to be
applied against any indebtedness owing from the Borrower to WFBCI that is
secured by such WebBank Collateral.
6. Adjustment of Insurance Proceeds.
In the event of any occurrence of any casualty with respect to
any Collateral, the parties hereto agree that the party holding the first and
prior security interest pursuant to the terms of this Intercreditor Agreement
with respect to that portion of the Collateral affected by the casualty shall
have the exclusive right to adjust, compromise or settle any such loss with the
insurer thereof, and to collect and receive the proceeds from such insurer and
to hold such proceeds subject to the terms of the security agreement with
respect thereto and to the terms of this Intercreditor Agreement. Any insurer
shall be fully protected if it acts in reliance on the provisions of this
paragraph.
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7. Occupation of the Borrower's Premises.
(a) General. In the event that WFBCI and WebBank occupy any of
the Borrower's premises for the purpose of the repossession, sale, collection or
other disposition of any of the Collateral, WFBCI and WebBank shall in good
faith cooperate to maximize the combined value of the Collateral and to minimize
the costs incident thereto, provided that, neither WFBCI nor WebBank shall be
required to cooperate in any action which such party reasonably believes will
reduce the value of its collateral. The time during which such occupation occurs
shall be called herein the "Occupation Period."
(b) Use of Equipment to Finish WIP. Without limiting the
foregoing, during the Occupation Period, upon written request by WFBCI, WebBank
shall allow WFBCI to use any equipment located at such premises that is
necessary to finish any work-in-process inventory for a reasonable period of
time (the "WIP Finish Period"). During the WIP Finish Period, WFBCI shall pay to
WebBank monthly rent equal to the payment due from the Borrower to WebBank under
the WebBank Loan and related promissory note; provided that WFBCI may terminate
such rental payments upon not less than 30 days' prior written notice to WebBank
of the end of the WIP Finish Period. During the WIP Finish Period, WebBank may
appraise such equipment and take other actions in preparation for sale of such
equipment provided that (i) no such actions interfere materially with WFBCI's
ability to use such equipment to finish work-in-process inventory and (ii)
WebBank gives WFBCI 30 days' prior written notice of any sale of any such
equipment.
(c) Payment of Rent. In the event that only one party hereto
is occupying a given premises, such party shall be solely responsible for
payment of Rent for such premises. As used in this agreement, "Rent" for any
premises shall mean rent and related payments to be paid to the owner of such
premises as required by law or by agreement. In the event both parties
simultaneously occupy a given leased premises, other than a premises owned by
the Borrower, each party shall be responsible for payment of one-half of Rent
for such premises. To the extent a party has actually paid Rent for which the
other party is responsible as set forth in this paragraph, the party responsible
for such payment shall promptly reimburse the other party for the amount of such
Rent. For the purpose of this paragraph 7(c), no party shall be deemed to occupy
a premises simply by making periodic visits to such premises to inspect or
appraise such party's collateral located on the premises.
(d) Damage to Premises. If any premises is damaged during
occupation of such premises by both parties hereto and payment for such damage
must be made to the owner of such premises by either party, the parties shall
make a good-faith effort to determine which party (or which party's agent)
caused such damage. If after such good-faith effort no party can be shown to be
clearly at fault, each party shall pay one-half of the cost of such damage;
otherwise, the party determined to be at fault shall pay all of the cost of such
damage. If any premises are damaged during occupation of such premises by one
party and payment for such damage must be made to the owner of such premises,
such party shall pay the entire cost of such damage.
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8. Continuing Agreement. The subordinations, agreements, and
priorities set forth hereinabove shall remain in full force and effect
regardless of whether either party hereto in the future seeks to rescind, amend,
terminate, or reform, by litigation or otherwise, its agreements with the
Borrower.
9. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto, but neither the
Borrower nor any other secured party shall be entitled to rely on or enforce
this Agreement and the parties hereto warrant that any purchaser or transferee
of, or successor to, any security interest of any of the parties hereto in any
or all of the Collateral will be given detailed written notice of the
subordination accomplished hereby, prior to the time of purchase, transfer or
succession.
(b) Either party may at any time and from time to time amend
its agreement with the Borrower without notice to or consent of the other party
and without affecting or impairing the subordination affected hereby.
(c) The parties hereto hereby agree to execute any and all
other further documents, agreements or instruments or to take such other steps
as from time to time are necessary in order to effectuate the purposes of the
foregoing.
(d) All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied, telegraphed, cabled or delivered to
the intended recipient at its address or telex number specified beneath its
signature hereto or at such other telex number or address as shall be designated
by any party in a notice to each other party. Except as otherwise provided
herein, all notices and other communications hereunder shall be deemed to have
been duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, seven days after the date deposited in the mails, postage prepaid, in
each case given or addressed as aforesaid.
(e) This Agreement may be executed in any number of
counterparts or by facsimile, each of which when so executed and delivered shall
be an original, but such counterparts shall together constitute one and the same
instrument.
(f) This Agreement is made and executed under and in all
respects is to be governed and construed in accordance with the internal laws of
the State of Utah.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
XXXXX FARGO BUSINESS CREDIT, INC., f/k/a Norwest Business Credit, Inc.
By:
Its: Vice President
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Att.: Xxx Xxxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
WEBBANK CORPORATION
By:
Its:
000 Xxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxx Xxxx, Xxxx 00000-0000
Att.: __________________
Phone: (000) 000-0000
Fax: (000) 000-0000
ACKNOWLEDGED BY:
Naco Industries, Inc.
By:
Its: President
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Exhibit A
INTERCREDITOR AGREEMENT
DESCRIPTION OF WEBBANK COLLATERAL
The WebBank Collateral is all of Naco Industries, Inc.'s (the
"Borrower") interest in the Equipment, IP Collateral, Proceeds, Escrow Account
and Fixtures, all as defined below, whether now owned or existing or hereafter
acquired or arising, together with any and all additions thereto and
replacements therefor and proceeds and products thereof:
a. Equipment: All presently owned and hereafter acquired equipment,
whether or not affixed to realty, including, without limitation, machines,
computers, trucks, trailers, goods, accessories, handling and delivery
equipment, fixtures, improvements, office machines, restaurant equipment and
furniture, and all accessions, accessories, replacements and the rights of the
Borrower under any manufacturer's warranties relating to the foregoing (the
"Equipment");
b. Intellectual Property:All presently owned and hereafter acquired IP
Collateral (as defined below) and all general intangibles directly related to
the IP Collateral, the Equipment or the manufacturing process of the Borrower,
including, without limitation, an "general intangible" as that term is defined
in the Uniform Commercial Code. For the purpose of this Agreement, IP Collateral
means any and all patents, patent applications and related filings, trademarks
(both registered and unregistered), trademark applications and related filings,
service marks (both registered and unregistered), service xxxx applications and
related filings, trade names, know-how and trade secrets, copyrights, copyright
registrations and related filings, computer software, programs and technology,
and all other intellectual property and proprietary rights;
c. Proceeds: All presently owned and hereafter acquired proceeds as
that term is defined in the Uniform Commercial Code, of the Equipment, IP
Collateral, Escrow Agreement and Fixtures, including, without limitation,
whatever is received upon the use, lease, sale, exchange, collection, any other
utilization or any disposition of any of the Equipment, IP Collateral, Escrow
Account or Fixtures, whether cash or non-cash;
d. Escrow Account:All of the Borrower's interest in and to the deposit
and escrow account established and maintained pursuant to that certain Deposit
and Escrow Agreement between WebBank, Escrow Agent and Borrower dated as of the
date hereof (the "Escrow Account"); and
e. Fixtures: All presently owned and hereafter acquired fixtures, as
that term is defined in the UCC, and all accessions, accessories, replacements
and the rights of the Borrower under any manufacturer's warranties relating to
the foregoing (the "Fixtures").
Any of the foregoing terms which are defined in the Uniform Commercial
Code as adopted in Utah (the "UCC") shall have the meaning provided in the UCC
as supplemented and expanded by the foregoing.
0
XXXXXXXX
Xxxxxx, Xxxxxxxx
April 22, 1999
This Guaranty, dated as of April 22, 1999 is made by Xxxxx
Xxxx (the "Guarantor") for the benefit of Xxxxx Fargo Business Credit, Inc.,
f/k/a Norwest Business Credit, Inc., a Minnesota corporation (with its
participants, successors and assigns, the "Lender").
The Lender and Naco Industries, Inc., a Utah corporation (the
"Borrower"), are parties to a Credit and Security Agreement of even date
herewith pursuant to which the Lender may make advances and extend other
financial accommodations to the Borrower.
As a condition to extending such credit to the Borrower, the
Lender has required the execution and delivery of this Guaranty.
ACCORDINGLY, the Guarantor, in consideration of the premises
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, hereby agrees as follows:
1. Definitions.All terms defined in the Credit Agreement that
are not otherwise defined herein shall have the meanings given them in the
Credit Agreement.
2. Indebtedness Guaranteed. The Guarantor hereby absolutely
and unconditionally guarantees to the Lender the full and prompt payment when
due, whether at maturity or earlier by reason of acceleration or otherwise, of
(i) the Obligations and (ii) each and every other sum now or hereafter owing to
the Lender by the Borrower, including but not limited to, debts, liabilities and
obligations arising out of loans, credit transactions, financial accommodations,
discounts, purchases of property or other transactions with the Borrower or for
the Borrower's account or out of any other transaction or event, owed to the
Lender or owed to others by reason of participations granted to or interests
acquired or created for or sold to them by the Lender, in each case whether now
existing or hereafter arising, whether arising directly in a transaction or
event involving the Lender or acquired by the Lender from another by purchase or
assignment or as collateral security, whether owed by the Borrower as drawer,
maker, endorser, accommodation party, guarantor, principal, surety or as a
member of any partnership, syndicate, association or group or in any other
capacity, whether absolute or contingent, direct or indirect, primary or
secondary, sole, joint, several or joint and several, secured or unsecured, due
or not due, contractual, tortious or statutory, liquidated or unliquidated,
arising by agreement or imposed by law or otherwise (all of said sums being
hereinafter called the "Indebtedness").
3. Unconditional Guaranty. No act or thing need occur to
establish the liability of the Guarantor hereunder, and no act or thing, except
full payment and discharge of all of the Indebtedness, shall in any way
exonerate the Guarantor hereunder or modify, reduce, limit or release the
Guarantor's liability hereunder. This is an absolute, unconditional and
continuing guaranty of payment of the Indebtedness and shall continue to be in
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force and be binding upon the Guarantor, whether or not all of the Indebtedness
is paid in full, until this Guaranty is revoked prospectively as to future
transactions, by written notice actually received by the Lender, and such
revocation shall not be effective as to the amount of Indebtedness existing or
committed for at the time of actual receipt of such notice by the Lender, or as
to any renewals, extensions, refinancings or refundings thereof. The death or
incompetence of the Guarantor shall not revoke this Guaranty, except upon actual
receipt of written notice thereof by the Lender and only prospectively, as to
future transactions, as herein set forth.
4. Death or Insolvency of Guarantor. If the Guarantor shall
die or shall be or become insolvent (however defined), then the Lender shall
have the right to declare immediately due and payable, and the Guarantor will
forthwith pay to the Lender, the full amount of all of the Indebtedness whether
due and payable or unmatured. If the Guarantor voluntarily commences or there is
commenced involuntarily against the Guarantor a case under the United States
Bankruptcy Code, the full amount of all of the Indebtedness, whether due and
payable or unmatured, shall be immediately due and payable without demand or
notice thereof.
5. Subrogation, etc. The Guarantor hereby waives all rights
that the Guarantor may now have or hereafter acquire, whether by subrogation,
contribution, reimbursement, recourse, exoneration, contract or otherwise, to
recover from the Borrower or from any property of the Borrower any sums paid
under this Guaranty. The Guarantor will not exercise or enforce any right of
contribution to recover any such sums from any person who is a co-obligor with
the Borrower or a guarantor or surety of the Indebtedness or from any property
of any such person until all of the Indebtedness shall have been fully paid and
discharged.
6. Enforcement Expenses. The Guarantor will pay or reimburse
the Lender for all costs, expenses and attorneys' fees paid or incurred by the
Lender in endeavoring to collect and enforce the Indebtedness and in enforcing
this Guaranty.
7. Lender's Rights. The Lender shall not be obligated by
reason of its acceptance of this Guaranty to engage in any transactions with or
for the Borrower. Whether or not any existing relationship between the Guarantor
and the Borrower has been changed or ended and whether or not this Guaranty has
been revoked, the Lender may enter into transactions resulting in the creation
or continuance of the Indebtedness and may otherwise agree, consent to or suffer
the creation or continuance of any of the Indebtedness, without any consent or
approval by the Guarantor and without any prior or subsequent notice to the
Guarantor. The Guarantor's liability shall not be affected or impaired by any of
the following acts or things (which the Lender is expressly authorized to do,
omit or suffer from time to time, both before and after revocation of this
Guaranty, without consent or approval by or notice to the Guarantor): (i) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all of the Indebtedness; (ii) one or more extensions or renewals of
the Indebtedness (whether or not for longer than the original period) or any
modification of the interest rates, maturities, if any, or other contractual
terms applicable to any of the Indebtedness or any amendment or modification of
any of the terms or provisions of any loan agreement or other agreement under
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which the Indebtedness or any part thereof arose; (iii) any waiver or indulgence
granted to the Borrower, any delay or lack of diligence in the enforcement of
the Indebtedness or any failure to institute proceedings, file a claim, give any
required notices or otherwise protect any of the Indebtedness; (iv) any full or
partial release of, compromise or settlement with, or agreement not to xxx, the
Borrower or any guarantor or other person liable in respect of any of the
Indebtedness; (v) any release, surrender, cancellation or other discharge of any
evidence of the Indebtedness or the acceptance of any instrument in renewal or
substitution therefor; (vi) any failure to obtain collateral security (including
rights of setoff) for the Indebtedness, or to see to the proper or sufficient
creation and perfection thereof, or to establish the priority thereof, or to
preserve, protect, insure, care for, exercise or enforce any collateral
security; or any modification, alteration, substitution, exchange, surrender,
cancellation, termination, release or other change, impairment, limitation, loss
or discharge of any collateral security; (vii) any collection, sale, lease or
disposition of, or any other foreclosure or enforcement of or realization on,
any collateral security; (viii) any assignment, pledge or other transfer of any
of the Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits upon the Indebtedness; and (x) any
election by the Lender under Section 1111(b) of the United States Bankruptcy
Code. The Guarantor waives any and all defenses and discharges available to a
surety, guarantor or accommodation co- obligor.
8. Waivers by Guarantor. The Guarantor waives any and all
defenses, claims, setoffs and discharges of the Borrower, or any other obligor,
pertaining to the Indebtedness, except the defense of discharge by payment in
full. Without limiting the generality of the foregoing, the Guarantor will not
assert, plead or enforce against the Lender any defense of waiver, release,
discharge or disallowance in bankruptcy, statute of limitations, res judicata,
statute of frauds, anti- deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to the Borrower or any
other person liable in respect of any of the Indebtedness, or any setoff
available against the Lender to the Borrower or any other such person, whether
or not on account of a related transaction. The Guarantor expressly agrees that
the Guarantor shall be and remain liable for any deficiency remaining after
foreclosure of any mortgage or security interest securing the Indebtedness,
whether or not the liability of the Borrower or any other obligor for such
deficiency is discharged pursuant to statute or judicial decision. The liability
of the Guarantor shall not be affected or impaired by any voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
event or proceeding affecting, the Borrower or any of its assets. The Guarantor
will not assert, plead or enforce against the Lender any claim, defense or
setoff available to the Guarantor against the Borrower. The Guarantor waives
presentment, demand for payment, notice of dishonor or nonpayment and protest of
any instrument evidencing the Indebtedness. The Lender shall not be required
first to resort for payment of the Indebtedness to the Borrower or other
persons, or their properties, or first to enforce, realize upon or exhaust any
collateral security for the Indebtedness, before enforcing this Guaranty.
9. If Payments Set Aside, etc. If any payment applied by the
Lender to the Indebtedness is thereafter set aside, recovered, rescinded or
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required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other obligor),
the Indebtedness to which such payment was applied shall for the purpose of this
Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
10. Additional Obligation of Guarantor. The Guarantor's
liability under this Guaranty is in addition to and shall be cumulative with all
other liabilities of the Guarantor to the Lender as guarantor, surety, endorser,
accommodation co-obligor or otherwise of any of the Indebtedness or obligation
of the Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
11. Financial Information. The Guarantor will provide to the
Lender annually a personal financial statement prepared as of December 31
listing all assets, liabilities and net worth of the Guarantor. The statement
will be signed and dated and will be forwarded with the tax returns to the
Lender not later than April 30th of each year. The Guarantor acknowledges and
agrees that the Lender may at any time and from time to time without notice to
the Guarantor, investigate the Guarantor's background, personal and credit
history and perform other due diligence concerning the Guarantor and his
creditworthiness.
12. No Duties Owed by Lender. The Guarantor acknowledges and
agrees that the Lender (i) has not made any representations or warranties with
respect to, (ii) does not assume any responsibility to the Guarantor for, and
(iii) has no duty to provide information to the Guarantor regarding, the
enforceability of any of the Indebtedness or the financial condition of the
Borrower or any guarantor. The Guarantor has independently determined the
creditworthiness of the Borrower and the enforceability of the Indebtedness and
until the Indebtedness is paid in full will independently and without reliance
on the Lender continue to make such determinations.
13. Miscellaneous. This Guaranty shall be effective upon
delivery to the Lender, without further act, condition or acceptance by the
Lender, shall be binding upon the Guarantor and the heirs, representatives,
successors and assigns of the Guarantor and shall inure to the benefit of the
Lender and its participants, successors and assigns. Any invalidity or
unenforceability of any provision or application of this Guaranty shall not
affect other lawful provisions and application thereof, and to this end the
provisions of this Guaranty are declared to be severable. This Guaranty may not
be waived, modified, amended, terminated, released or otherwise changed except
by a writing signed by the Guarantor and the Lender. This Guaranty shall be
governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Colorado. The Guarantor hereby (i) consents to
the personal jurisdiction of the state and federal courts located in the State
of Colorado in connection with any controversy related to this Guaranty; (ii)
waives any argument that venue in any such forum is not convenient, (iii) agrees
that any litigation initiated by the Lender or the Guarantor in connection with
this Guaranty shall be venued in either the District Court of the City and
County of Denver, Colorado, or the United States District Court for the District
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of Colorado; and (iv) agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
14. Waiver of Jury Trial. THE UNDERSIGNED HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF, BASED ON OR PERTAINING TO THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by
the Guarantor as of the date first written above.
/s/Xxxxx Xxxx
-------------
Xxxxx Xxxx
Address:
c/o Naco Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me the ____
day of April, 1999, by Xxxxx Xxxx.
Notary Public
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CERTIFICATE OF AUTHORITY
I, Xxxx Xxxxx, do hereby certify that I am Secretary of Naco
Industries, Inc., a corporation organized under the laws of the State of Utah;
that the following is a true, complete and correct copy of resolutions duly
adopted (check one):
|_| at a meeting of the board of directors of said corporation
duly and properly called and held on the ____ day of April,
1999, at which a quorum was present and acting throughout;
|_| by unanimous written action duly and lawfully taken,
subscribed by all the directors of said corporation;
and I further certify that said resolutions are now in full force and effect:
First Resolution
RESOLVED that the President, each Vice President, the Secretary, the
Treasurer and each other officer and agent of this corporation, acting
alone or acting with others, be and each of them hereby is authorized:
i) To borrow money and obtain other credit or financial
accommodations, in any amount, from Xxxxx Fargo Business
Credit, Inc., f/k/a Norwest Business Credit, Inc. (herein,
with its participants, successors and assigns called the
"Lender") for and on behalf of and in the name of this
corporation;
ii) To sign, execute and deliver loan or credit agreements,
promissory notes, acceptances or other evidences of
indebtedness therefor, or in renewal or amendment thereof, in
such amounts and for such time, at such rates of interest and
upon such terms as such officer or agent may approve, such
approval to be conclusively evidenced by such officer or
agent's signature thereon;
iii) To discount, sell, assign, transfer, mortgage, or pledge
to the Lender, or create security interests in, the real
property, goods, instruments, documents of title, securities,
chattel paper, accounts, contract rights or other intangibles
or any other property now or hereafter owned by this
corporation, either absolutely, with or without recourse, for
such consideration as such officer or agent may deem to be
appropriate or as security for the payment or performance of
any debts, liabilities or obligations owed to the Lender;
iv) To do such other acts and things, make such other
agreements and execute and deliver such other contracts or
writings as such officer or agent may deem to be appropriate
in connection with any of the foregoing.
-1-
Second Resolution
RESOLVED FURTHER that (without limiting the generality of the foregoing
resolution) each officer and agent referred to in the foregoing
resolution, acting alone or acting with others, be and is hereby
authorized and directed to execute, deliver and perform the following
instruments and agreements:
(a) Credit and Security Agreement, by and between this
corporation and the Lender, in the form finally approved and executed
by any of the officers authorized above.
(b) All other Loan Documents (as defined in said Credit and
Security Agreement), in the form finally approved and executed by any
of the officers authorized above.
Third Resolution
RESOLVED FURTHER that the Secretary or an Assistant Secretary shall
certify to the Lender the names and signatures of the persons who
presently are duly elected, qualified and acting as the officers or
agents referred to in the foregoing resolutions, and the Secretary or
an Assistant Secretary shall from time to time hereafter, upon a change
in the facts so certified, immediately certify to the Lender the names
and signatures of the persons then authorized to sign or to act; the
Lender shall be fully protected in relying on such certificates and on
the obligation of the Secretary or an Assistant Secretary (set forth
above) immediately to certify to the Lender any change in any facts so
certified; and the Lender shall be indemnified and saved harmless by
this corporation from any claims, demands, expenses, loss or damage
resulting from or growing out of honoring or relying on the signature
or other authority (whether or not properly used) of any officer or
person whose name and signature was so certified, or refusing to honor
any signature or authority not so certified.
Fourth Resolution
RESOLVED FURTHER that the foregoing resolutions are in addition to, and
do not limit and shall not be limited by, any resolutions heretofore or
hereafter adopted by this corporation for the conduct of business with
the Lender; and the foregoing resolutions shall continue in force until
express written notice of their prospective rescission or modification,
as to future transactions not then undertaken or committed for, has
been received by the Lender.
-2-
Fifth Resolution
RESOLVED FURTHER that any and all transactions by or on behalf of this
corporation with the Lender prior to the adoption of these resolutions
be and the same hereby are in all respects ratified, approved and
confirmed.
I further certify that the board of directors of said
corporation has, and at the time of adoption of the foregoing resolutions had,
full power and lawful authority to adopt the foregoing resolutions and to confer
the powers therein granted to the persons named and that such persons have full
power and authority to exercise same. I further certify that the signatures
appearing below are the authentic and official signatures of the officers and
agents referred to in the foregoing resolutions, that the persons named below as
officers have been duly elected to and now hold the offices in said corporation
set forth opposite their respective names, and that the persons named as agents
below have been duly authorized to sign and to act on behalf of said corporation
pursuant to the foregoing resolutions:
Name Title Sample Signature
Xxxxx Xxxx President /s/Xxxxx Xxxx
-------------
Xxxx Xxxxx Secretary /s/Xxxx Xxxxx
-------------
I further certify (check one):
|_| that the foregoing resolutions were duly approved by the
shareholders of said corporation at a meeting duly and
properly called and held on the _____ day of April, 1999, at
which a quorum was present and acting throughout, or otherwise
as permitted by law;
|_| that the foregoing resolutions are effective and binding on
said corporation without approval by its shareholders.
I further certify that the forms of Credit and Security
Agreement and the other Loan Documents, and any other writings identified in the
Second Resolution set forth above, executed on behalf of said corporation by its
President and delivered to the Lender are the agreements and writings referred
to in and approved by the Second Resolution set forth above.
I further certify that attached hereto as Exhibits A and B,
respectively, are true, correct and complete copies of the articles of
incorporation and bylaws of said corporation, which articles and bylaws are in
-3-
full force and effect and have not been altered, amended or revised. I further
certify that attached hereto as Exhibit C is a Certificate of Good Standing of
the Company not more than ten days old.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
22nd day of April, 1999.
Secretary
Attest by One Other Officer
President
-4-
Exhibit A to Secretary's Certificate
ARTICLES OF INCORPORATION
[TO BE PROVIDED BY BORROWER]
A-1
Exhibit B to Secretary's Certificate
BYLAWS
[TO BE PROVIDED BY BORROWER]
B-1
Exhibit C to Secretary's Certificate
CERTIFICATE OF GOOD STANDING
[TO BE PROVIDED BY BORROWER]
C-1
PATENT AND TRADEMARK SECURITY AGREEMENT
This Agreement, dated as of April 22, 1999, is made by and
between Naco Industries, Inc., a Utah corporation whose address and principal
place of business is 000 Xxxx 0000 Xxxxx, Xxxxx, XX 00000 (the "Debtor"), and
XXXXX FARGO BUSINESS CREDIT, INC., f/k/a Norwest Business Credit, Inc., a
Minnesota corporation whose address and principal place of business is 0000
Xxxxxxxx, Xxxxxx, XX 00000-0000 (the "Secured Party").
Recitals
The Debtor and the Secured Party have entered into a Credit
and Security Agreement of even date herewith (as the same may hereafter be
amended, supplemented or restated from time to time, the "Credit Agreement")
setting forth the terms on which the Secured Party may now or hereafter make
certain loans or other financial accommodations to or for the account of the
Debtor.
As a further condition to making any loan or other financial
accommodation under the Credit Agreement or otherwise, the Secured Party has
required the execution and delivery of this Agreement by the Debtor.
ACCORDINGLY, in consideration of the mutual covenants
contained in the Credit Agreement and herein, the parties hereby agree as
follows:
1. Definitions. All terms defined in the Recitals hereto or in
the Credit Agreement that are not otherwise defined herein shall have the
meanings given to them therein. In addition, the following terms have the
meanings set forth below:
"Obligations" means each and every debt, liability and
obligation of every type and description arising under or in connection
with any Loan Document (as defined in the Credit Agreement) which the
Debtor may now or at any time hereafter owe to the Secured Party,
whether such debt, liability or obligation now exists or is hereafter
created or incurred and whether it is or may be direct or indirect, due
or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, independent, joint, several or joint and
several, and including specifically, but not limited to, the
Obligations (as defined in the Credit Agreement).
"Patents" means all of the Debtor's right, title and interest
in and to patents or applications for patents, fees or royalties with
respect to each, and including without limitation the right to xxx for
past infringement and damages therefor, and licenses thereunder, all as
presently existing or hereafter arising or acquired, including without
limitation the patents listed on Exhibit A.
"Trademarks" means all of the Debtor's right, title and
interest in and to trademarks, service marks, collective membership
-1-
marks, the respective goodwill associated with each, and licenses
thereunder, all as presently existing or hereafter arising or acquired,
including, without limitation, the marks listed on Exhibit B.
2. Security Interest. The Debtor hereby irrevocably pledges
and assigns to, and grants the Secured Party a security interest, with power of
sale to the extent permitted by law (the "Security Interest"), in the Patents
and in the Trademarks to secure payment of the Obligations.
3. Representations, Warranties and Agreements. The Debtor
hereby represents, warrants and agrees as follows:
(a) Existence; Authority. The Debtor is a corporation, having
full power to and authority to make and deliver this Agreement. The
execution, delivery and performance of this Agreement by the Debtor
have been duly authorized by all necessary action of the Debtor's board
of directors, and if necessary its stockholders, and do not and will
not violate the provisions of, or constitute a default under, any
presently applicable law or its articles of incorporation or bylaws or
any agreement presently binding on it. This Agreement has been duly
executed and delivered by the Debtor and constitutes the Debtor's
lawful, binding and legally enforceable obligation. The correct name of
the Debtor is Naco Industries, Inc. The authorization, execution,
delivery and performance of this Agreement do not require notification
to, registration with, or consent or approval by, any federal, state or
local regulatory body or administrative agency.
(b) Patents. Exhibit A accurately lists all Patents owned or
controlled by the Debtor as of the date hereof and accurately reflects
the existence and status of registrations pertaining to the Patents as
of the date hereof.
(c) Trademarks. Exhibit B accurately lists all Trademarks
owned or controlled by the Debtor as of the date hereof and accurately
reflects the existence and status of Trademarks and all registrations
pertaining thereto as of the date hereof.
(d) Title. The Debtor has absolute title to each Patent and
each Trademark listed on Exhibits A and B, free and clear of all
security interests, liens and encumbrances, except the Security
Interest and the security interest of WebBank Corporation. The Debtor
(i) will have, at the time the Debtor acquires any rights in Patents or
Trademarks hereafter arising, absolute title to each such Patent or
Trademark free and clear of all security interests, liens and
encumbrances, except the Security Interest, and (ii) will keep all
Patents and Trademarks free and clear of all security interests, liens
and encumbrances except the Security Interest.
(e) No Sale. The Debtor will not sell or otherwise dispose of
the Patents or Trademarks, or any interest therein, without the Secured
Party's prior written consent.
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(f) Defense. The Debtor will at its own expense, and using its
best efforts, protect and defend the Patents and Trademarks against all
claims or demands of all persons other than the Secured Party.
(g) Maintenance. The Debtor will at its own expense maintain
the Patents and the Trademarks to the extent reasonably advisable in
its business including, but not limited to, filing all applications to
register and all affidavits and renewals possible with respect to
issued registrations. The Debtor covenants that it will not abandon nor
fail to pay any maintenance fee or annuity due and payable on any
Patent or Trademark, nor fail to file any required affidavit in support
thereof, without first providing the Secured Party: (i) sufficient
written notice, as provided in the Credit Agreement, to allow the
Secured Party to timely pay any such maintenance fees or annuity which
may become due on any of said Patents or Trademarks, or to file any
affidavit with respect thereto, and (ii) a separate written power of
attorney or other authorization to pay such maintenance fees or
annuities, or to file such affidavit, should such be necessary or
desirable.
(h) Secured Party's Right to Take Action. If the Debtor fails
to perform or observe any of its covenants or agreements set forth in
this Section 3, and if such failure continues for a period of ten (10)
calendar days after the Secured Party gives the Debtor written notice
thereof (or, in the case of the agreements contained in subsection (g),
immediately upon the occurrence of such failure, without notice or
lapse of time), or if the Debtor notifies the Secured Party that it
intends to abandon a Patent or Trademark, the Secured Party may (but
need not) perform or observe such covenant or agreement on behalf and
in the name, place and stead of the Debtor (or, at the Secured Party's
option, in the Secured Party's own name) and may (but need not) take
any and all other actions which the Secured Party may reasonably deem
necessary to cure or correct such failure.
(i) Costs and Expenses. Except to the extent that the effect
of such payment would be to render any loan or forbearance of money
usurious or otherwise illegal under any applicable law, the Debtor
shall pay the Secured Party on demand the amount of all moneys expended
and all costs and expenses (including reasonable attorneys' fees)
incurred by the Secured Party in connection with or as a result of the
Secured Party's taking action under subsection (h) or exercising its
rights under Section 6, together with interest thereon from the date
expended or incurred by the Secured Party at the highest rate then
applicable to any of the Obligations.
(j) Power of Attorney. To facilitate the Secured Party's
taking action under subsection (h) and exercising its rights under
Section 6, the Debtor hereby irrevocably appoints (which appointment is
coupled with an interest) the Secured Party, or its delegate, as the
attorney-in-fact of the Debtor with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or
file, in the name and on behalf of the Debtor, any and all instruments,
documents, applications, financing statements, and other agreements and
-3-
writings required to be obtained, executed, delivered or endorsed by
the Debtor under this Section 3, or, necessary for the Secured Party,
after an Event of Default, to enforce or use the Patents or Trademarks
or to grant or issue any exclusive or non-exclusive license under the
Patents or Trademarks to any third party, or to sell, assign, transfer,
pledge, encumber or otherwise transfer title in or dispose of the
Patents or Trademarks to any third party. The Debtor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue
hereof. The power of attorney granted herein shall terminate upon the
termination of the Credit Agreement as provided therein and the payment
and performance of all Obligations (as defined therein).
4. Debtor's Use of the Patents and Trademarks. The Debtor
shall be permitted to control and manage the Patents and Trademarks, including
the right to exclude others from making, using or selling items covered by the
Patents and Trademarks and any licenses thereunder, in the same manner and with
the same effect as if this Agreement had not been entered into, so long as no
Event of Default occurs and remains uncured.
5. Events of Default. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (a) an Event of Default, as defined in the Credit Agreement, shall
occur; or (b) the Debtor shall fail promptly to observe or perform any covenant
or agreement herein binding on it; or (c) any of the representations or
warranties contained in Section 3 shall prove to have been incorrect in any
material respect when made.
6. Remedies.Upon the occurrence of an Event of Default and at
any time thereafter, the Secured Party may, at its option, take any or all of
the following actions:
(a) The Secured Party may exercise any or all remedies
available under the Credit Agreement.
(b) The Secured Party may sell, assign, transfer, pledge,
encumber or otherwise dispose of the Patents and Trademarks.
(c) The Secured Party may enforce the Patents and Trademarks
and any licenses thereunder, and if Secured Party shall commence any
suit for such enforcement, the Debtor shall, at the request of Secured
Party, do any and all lawful acts and execute any and all proper
documents required by Secured Party in aid of such enforcement.
7. Miscellaneous. This Agreement has been duly and validly
authorized by all necessary action, corporate or otherwise. This Agreement can
be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by the Secured
Party. A waiver signed by the Secured Party shall be effective only in the
specific instance and for the specific purpose given. Mere delay or failure to
act shall not preclude the exercise or enforcement of any of the Secured Party's
rights or remedies. All rights and remedies of the Secured Party shall be
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cumulative and may be exercised singularly or concurrently, at the Secured
Party's option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. The Secured Party shall not be obligated to preserve any rights the
Debtor may have against prior parties, to realize on the Patents and Trademarks
at all or in any particular manner or order, or to apply any cash proceeds of
Patents and Trademarks in any particular order of application. This Agreement
shall be binding upon and inure to the benefit of the Debtor and the Secured
Party and their respective participants, successors and assigns and shall take
effect when signed by the Debtor and delivered to the Secured Party, and the
Debtor waives notice of the Secured Party's acceptance hereof. The Secured Party
may execute this Agreement if appropriate for the purpose of filing, but the
failure of the Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement. A carbon, photographic
or other reproduction of this Agreement or of any financing statement signed by
the Debtor shall have the same force and effect as the original for all purposes
of a financing statement. This Agreement shall be governed by the internal law
of Colorado without regard to conflicts of law provisions. If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Patent and
Trademark Security Agreement as of the date written above.
XXXXX FARGO BUSINESS CREDIT,
INC., f/k/a Norwest Business Credit, Inc.
By:
Its Vice President
NACO INDUSTRIES, INC.
By:
Its President
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STATE OF UTAH )
)
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this 22nd day of
April, 1999, by Xxxxx Xxxx, the President of Naco Industries, Inc., a Utah
corporation, on behalf of the corporation.
Notary Public
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this 22nd day of
April, 1999, by Xxxxxxx Xxxxx, a Vice President of Xxxxx Fargo Business Credit,
Inc., f/k/a Norwest Business Credit, Inc., a Minnesota corporation, on behalf of
the Corporation.
Notary Public
-6-
EXHIBIT A
---------
UNITED STATES ISSUED PATENTS
Title Patent Number Issue Date
----- ------------- ----------
One Piece Tubular Elbow and 5,597,185 January 28, 1997
Process of Manufacture
Plastic Tee Fitting 4,708,374 July 30, 1984
FOREIGN ISSUED PATENTS
None
X-0
XXXXXXX X
---------
XXXXXX XXXXXX ISSUED TRADEMARKS, SERVICE MARKS
----------------------------------------------
AND COLLECTIVE MEMBERSHIP MARKS
-------------------------------
REGISTRATIONS
-------------
None
APPLICATIONS
------------
None
COLLECTIVE MEMBERSHIP MARKS
---------------------------
None
UNREGISTERED MARKS
------------------
None
B-1
MORTGAGEE'S DISCLAIMER AND CONSENT
To induce Xxxxx Fargo Business Credit, Inc., f/k/a Norwest
Business Credit, Inc., a Minnesota corporation (the "Lender"), to make one or
more loans to Naco Industries, Inc., a Utah corporation (the "Borrower"),
secured by property of the Borrower, and for other good and valuable
consideration, WebBank Corporation, a Utah corporation (the "Mortgagee"), hereby
certifies and agrees for the benefit of the Lender, its participants, successors
and assigns, as follows:
1. The Mortgagee holds a mortgage lien on certain premises
(the "Premises") located in Xxxxxx County, Kansas and described in Exhibit A
hereto, pursuant to a mortgage (the "Mortgage"), a true, correct and complete
copy of which is attached hereto as Exhibit B.
2. The Mortgage is in full force and effect and the Borrower
is not in default of any provision of the Mortgage.
3. The Mortgagee acknowledges that except as set forth in this
paragraph 3, the Lender shall have no duty, obligation or liability whatsoever
with respect to the possession, occupancy or use of the Premises. If the Lender
takes possession of or occupies the Premises pursuant to paragraph 5 hereof
whether before or after cancellation or termination of the Mortgage, the Lender
shall pay the Mortgagee rent for the period during which the Lender has
possession of or occupies the Premises equal to the mortgage payments due under
the Mortgage for such period. The Lender shall possess or occupy the Premises
for no less than 30 days and shall be required to give the Mortgagee 30 days'
written notice of its intent to vacate the Premises. In no event, however, shall
the Lender be obligated to make payments due pursuant to the Mortgage for any
period to the extent the Borrower has made such payments for such period. The
Lender shall reimburse the Mortgagee for any physical damage to the Premises
actually caused by the Lender during any period when the Lender is in possession
of the Premises. The Mortgagee acknowledges that the Lender shall not be liable
for any diminution in value of the Premises during the period of time in which
the Lender has physical possession of the Premises.
4. The Mortgagee shall promptly notify the Lender as provided
herein of each of the following events:
(a) Any notice which the Mortgagee may give to the Borrower
regarding any breach of the Mortgage, or any termination of the
Borrower's rights to use, lease or possess the Premises;
(b) Any legal action which the Mortgagee may commence to
foreclose the Borrower's interests in the Premises or to appoint a
receiver for the Premises; and
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(c) Any agreement or proposal for the Borrower to voluntarily
convey to the Mortgagee title to all or any portion of the Premises.
5. Subject to the terms of paragraph 3 hereof, the Mortgagee
shall allow the Lender to take and remain in possession of the Premises for
purposes of holding, processing, manufacturing, selling, using, storing,
liquidating, realizing upon or otherwise disposing of the Lender's collateral,
and for related and incidental purposes from and after the receipt by the Lender
of the notice required under paragraph 4 hereof.
6. All notices to the Lender shall be deemed given when
received by the Lender at 0000 Xxxxxxxx, Xxxxxx, XX 00000-0000, Attn: Xxx
Xxxxxxxxxx, or when received at the Lender's telecopier no. 303/863-4904.
7. This Disclaimer and Consent is binding upon the Mortgagee
and its successors and assigns. This Disclaimer and Consent shall be governed by
and construed in accordance with the substantive laws (other than conflict laws)
of the State of Utah. This Disclaimer and Consent may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. No failure on the part of the Lender to
exercise, and no delay in exercising any right, power or remedy hereunder shall
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any right, power or remedy hereunder preclude any other or
further exercise of such right, power or remedy or the exercise of any other
right, power or remedy. This Disclaimer and Consent expresses completely,
exclusively and finally all the agreements, conditions and covenants of the
parties and does not need evidence (written or oral) of prior, contemporaneous
or subsequent statements or representations (express or implied) to reflect the
intentions of the parties. This Disclaimer and Consent may not be supplemented
or modified except in writing. This does not imply a commitment to lend and
shall be binding as long as any obligations of the Borrower to the Lender remain
outstanding or are subject to recoupment. THE PARTIES WAIVE ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS DISCLAIMER
AND CONSENT.
IN WITNESS WHEREOF, this Disclaimer is signed on April __,
1999.
WEBBANK CORPORATION
By
Its
-2-
This Instrument was Drafted by:
Xxxxxx X. Xxxxxx, Esq.
LeBoeuf, Lamb, Xxxxxx & XxxXxx, LLP
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this ____
day of April, 1999, by _____________, the ________________________, of WebBank
Corporation , a ____________________ corporation, on behalf of said corporation.
Notary Public
-3-
EXHIBIT A
TO
MORTGAGEE'S DISCLAIMER AND CONSENT
The Premises referred to in the referenced instrument are
located in Xxxxxx County, Kansas, and are described as follows:
Beginning at a point 60 feet North and 1,080 feet West of the
Southeast corner of Section Three (3), Township Twenty-four (24) South,
Range Thirty- three (33) West of the 6th P.M., in Xxxxxx County,
Kansas, for the point of beginning; thence West on a line parallel to
and 60 feet North of the South line of said Section 3 a distance of 420
feet; thence North at an interior angle of 89(0)07' a distance of 360
feet; thence East at an interior angle of 90(0)53' a distance of 420
feet; and thence South at an interior angle of 89(0)07' a distance of
360 feet to the point of beginning; also described as Tracts 8, 9 and
10 in the Xxxxxx Survey of such real estate dated February 23, 1966,
prepared by Xxxxxx X. Xxxxx, P.E., and filed for record in the County
Engineer's Office of Xxxxxx County, Kansas, in Survey Book 3.
EXHIBIT B
TO
MORTGAGEE'S DISCLAIMER AND CONSENT
[copy of Mortgage]
WAIVER OF INTEREST
I, __________________ am the spouse of Xxxxx Xxxx. I
understand that to induce Xxxxx Fargo Business Credit, Inc., f/k/a Norwest
Business Credit, Inc., a Minnesota corporation (herein, with its participants,
successors and assigns, called the "Lender"), to extend credit to Naco
Industries, Inc., a Utah corporation (the "Borrower"), my spouse has agreed to
guaranty the payment of any indebtedness of the Borrower to the Lender (the
"Indebtedness").
The Lender's credit decision will be based, in part, on our
financial statement which is a joint financial statement that does not
distinguish between assets that are owned separately by one of us or that are
owned jointly. To induce the Lender to extend credit to the Borrower based, in
part, on my spouse's guaranty, I hereby waive as against the Lender any interest
I now have or may in the future have in (1) any real or personal property shown
on any financial statement of ours submitted in connection with my spouse's
guaranty, and (2) any other real or personal property now owned or hereafter
acquired by either of us individually or by both of us jointly (all such
property described in clauses (1) and (2) being referred to as the "Property"),
except for wages or salary that I earn from third parties not directly or
indirectly affiliated with the Borrower or directly or indirectly affiliated
with or related to my spouse so long as such wages and salary are kept separate
from property of my spouse and property I own jointly with my spouse; I
understand that in the event of a dispute between the Lender and me, I will have
the burden of proving that property is subject to the above mentioned exception.
I understand that one of the remedies that the Lender has upon
default in the Indebtedness is to satisfy the Indebtedness out of the Property
either by obtaining a judgment against my spouse or otherwise, and in that event
I understand and agree that if the Lender attempts to satisfy the Indebtedness
out of the Property, I will not claim any ownership or other interest in the
Property.
I also acknowledge that by signing any mortgage or security
agreement securing my spouse's guaranty, I have subjected any interest I may
have in the Property described therein to the lien and security interest of the
mortgage or the security agreement.
By its acceptance of this Waiver and by extending credit to
the Borrower, the Lender agrees that I am not personally liable to repay the
Indebtedness.
Dated April ___, 1999.
Name: _____________________________
-1-
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this ____
day of April, 1999, by ______________.
Notary Public
Accepted this ____ day of April, 1999
XXXXX FARGO BUSINESS CREDIT, INC.,
f/k/a NORWEST BUSINESS CREDIT, INC.
By:/s/Xxxxxxx Xxxxx
-------------------
Xxxxxxx Xxxxx
Its Vice President
-2-
OFFICER'S CERTIFICATE
TO: Xxxxx Fargo Business Credit, Inc., f/k/a Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, XX 00000-0000
ATTN: Xxx Xxxxxxxxxx
To induce you to make one or more loans from time to time to
Naco Industries, Inc., a Utah corporation (the "Borrower"), in accordance with
the Credit and Security Agreement dated April 22, 1999 between it and you (the
"Credit and Security Agreement") and all other Loan Documents (as defined in the
Credit and Security Agreement), I hereby represent and warrant to you, in my
individual capacity, that each and every representation and warranty set forth
in Article V of the Credit and Security Agreement is true and correct as of the
date hereof.
Dated: April 22, 1999
Very truly yours,
/s/Xxxxx Xxxx
-------------
Xxxxx Xxxx
ASSIGNMENT OF LIFE INSURANCE POLICY
AS COLLATERAL
This Assignment, dated as of February ___, 1999, is made by
Naco Industries, Inc., a Utah corporation whose address is 000 Xxxx 0000 Xxxxx,
Xxxxx, XX, 00000 (the "Assignor"), for the benefit of Norwest Business Credit,
Inc., a Minnesota corporation, whose address is 0000 Xxxxxxxx, Xxxxxx, XX
00000-0000 its successors and assigns (the "Assignee").
Recitals
--------
The Assignor and the Assignee have entered into a Credit and
Security Agreement (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") dated as of February_____,
1999. To induce the Assignee to execute the Credit Agreement and to secure
payment and performance of the Assignor's Obligations (as defined in the Credit
Agreement), the Assignee has required the execution and delivery of this
Agreement.
Accordingly, the Assignor hereby agrees for the benefit of the
Assignee as follows:
1. The Assignor hereby assigns, transfers and sets over to the
Assignee, Policy No. _____________ issued by ___________________________ (the
"Insurer") and any supplementary contracts issued in connection therewith (said
policy and contracts being herein called the "Policy"), upon the life of Xxxxx
Xxxx, whose address is ____________________________________ and all claims,
options, privileges, rights, title and interest therein and thereunder (except
as provided in Paragraph 3 hereof), subject to all terms and conditions of the
Policy and to all superior liens, if any, which the Insurer may have against the
Policy. The Assignor by this instrument agrees and the Assignee by the
acceptance of this Assignment agrees to the conditions and provisions herein set
forth.
2. It is expressly agreed that, without detracting from the
generality of the foregoing, the following specific rights are included in this
Assignment and pass by virtue hereof:
(a) The sole right to collect from the Insurer the net
proceeds of the Policy when it becomes a claim by death or maturity;
(b) The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of the Policy
and at such other times as the Insurer may allow;
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(c) The sole right to obtain one or more loans or advances on
the Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for such loans
or advances;
(d) The sole right to collect and receive all distributions of
shares of surplus, dividend deposits or additions to the Policy now or
hereafter made or apportioned thereto, and to exercise any and all
options contained in the Policy with respect thereto; provided, that
unless and until the Assignee shall notify the Insurer in writing to
the contrary, the distributions or shares of surplus, dividend deposits
and additions shall continue on the plan in force at the time of this
Assignment; and
(e) The sole right to exercise all nonforfeiture rights
permitted by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom.
3. It is expressly agreed that the following specific rights,
so long as the Policy has not been surrendered, are reserved and excluded from
this Assignment and do not pass by virtue hereof:
(a) The right to collect from the Insurer any disability
benefit payable in cash that does not reduce the amount of insurance;
(b) The right to designate and change the beneficiary;
(c) The right to elect any optional mode of settlement
permitted by the Policy or allowed by the Insurer;
but the reservation of these rights shall in no way impair the right of the
Assignee to surrender the Policy completely with all its incidents or impair any
other right of the Assignee hereunder, and any designation or change of
beneficiary or election of a mode of settlement shall be made subject to this
Assignment and to the rights of the Assignee hereunder.
4. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise in the ordinary course of
business between the Assignor and the Assignee, including, without limitation,
all Obligations as defined in Credit Agreement (defined above), (all of which
liabilities secured or to become secured are herein called "Liabilities").
5. The Assignee covenants and agrees with the Assignor as
follows:
(a) That any balance of sums received hereunder from the
Insurer remaining after payment of the then existing Liabilities,
matured or unmatured, shall be paid by the
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Assignee to the persons entitled thereto under the terms of the Policy
as if this Assignment not been executed;
(b) That the Assignee will not exercise either the right to
surrender the Policy or (except for the purpose of paying premiums) the
right to obtain policy loans from the Insurer, until there has been
default in any of the Liabilities or a failure to pay any premium when
due, nor until the Assignees shall have given the Assignor notice, in
accordance with the Credit Agreement, specifically referring to this
Assignment, of the Assignee's intention to exercise such right; and
(c) That the Assignee will upon request forward without
unreasonable delay to the Insurer the Policy for endorsement of any
designation or change of beneficiary or any election of an optional
mode of settlement.
6. The Insurer is hereby authorized to recognize the
Assignee's claims to rights hereunder without investigating the reason for any
action taken by the Assignee, or the validity or the amount of the Liabilities
or the existence of any default therein, or the giving of any notice under
Paragraph 5(b) above or otherwise, or the application to be made by the Assignee
of any amounts to be paid to the Assignee. The sole signature of the Assignee
for any sums received shall be a full discharge and release therefor to the
Insurer. Checks for all or any part of the sums payable under the Policy and
assigned herein, shall be drawn to the exclusive order of the Assignee if, when,
and in such amounts as may be, requested by the Assignee.
7. The Assignee shall be under no obligation to pay any
premium, or the principal of or interest on any loans or advances on the Policy
whether or not obtained by the Assignee, or any other charges on the Policy, but
any such amounts so paid by the Assignee from its own funds, shall become a part
of the Liabilities hereby secured, shall be due immediately, and shall draw
interest at a rate fixed by the Assignee from time to time not exceeding 6% per
annum.
8. The exercise of any right, option, privilege or power
given herein to the Assignee shall be at the option of the Assignee, but (except
as restricted by Paragraph 5(b) above) the Assignee may exercise any such right,
option, privilege or power without notice to, or assent by, or affecting the
liability of, or releasing any interest hereby assigned by the Assignor.
9. The Assignee may take or release other security, may
release any party primarily or secondarily liable for any of the Liabilities,
may grant extensions, renewals or indulgences with respect to the Liabilities,
or may apply to the Liabilities in such order as the Assignee shall determine,
the proceeds of the Policy hereby assigned or any amount received on account of
the Policy by the exercise of any right permitted under this Assignment, without
resorting or regard to other security.
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10. In the event of any conflict between the provisions of
this Assignment and provisions of the note or other evidence of any Liability,
with respect to the Policy or rights of collateral security therein, the
provisions of this Assignment shall prevail.
11. The Assignor declares that no proceeding in bankruptcy is
pending against it and that its property is not subject to any assignment for
the benefit of creditors.
Signed and sealed this ___ day of February, 1999.
Witness
Witness
Assignor:
By:
Its President
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STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____
day of ________________, 1999, by _________, the _________ of Naco Industries,
Inc., a Utah corporation, on behalf of the corporation.
Notary Public
Assignee:
NORWEST BUSINESS CREDIT, INC.
By
Its Vice President
Duplicate received and filed at the home office of the Insurer in
_________________, this _____ day of _________________, 1999.
(Life Insurance Company)
By
Its
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CREDIT AND SECURITY AGREEMENT
Dated as of April 22, 1999
NACO INDUSTRIES, INC., a Utah corporation (the "Borrower"),
and XXXXX FARGO BUSINESS CREDIT, INC., f/k/a Norwest Business Credit, Inc., a
Minnesota corporation (the "Lender"), hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the
Borrower arising out of the sale or lease of goods or rendition of
services by the Borrower on an open account or deferred payment basis.
"Advance" means a Revolving Advance or a Term Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including
(without limitation) any Subsidiary of the Borrower. For purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota and Denver, Colorado.
"Book Net Worth" means the aggregate of the common and
preferred stockholders' equity in the Borrower, determined in
accordance with GAAP.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
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(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 80% of Eligible Accounts,
(ii) the lesser of (A) 50% of Eligible Inventory or
(B) $750,000.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital
asset, or for the lease of any other asset whether payable currently or
in the future.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) proceeds of any and all of the foregoing;
(iii) in the case of all tangible goods, all accessions; (iv) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any tangible goods;
(v) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; and (vi) the Life Insurance
Policy.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrower's account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived.
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"Default Rate" means an annual rate equal to three percent
(3%) over the Revolving Floating Rate, which rate shall change when and
as the Revolving Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts that are not created
under the Borrower's "Early Order Program" and that are unpaid
90 days or more after the invoice date, and that portion of
Accounts that are created under the Borrower's "Early Order
Program" that are unpaid 30 days or more after the stated due
date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(v) Accounts owed by an account debtor located
outside the United States which are not (A) backed by a bank
letter of credit naming the Lender as beneficiary or assigned
to the Lender, in the Lender's possession and acceptable to
the Lender in all respects, in its sole discretion, (B)
covered by a foreign receivables insurance policy acceptable
to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender including without limitation any payment
or performance bond;
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(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 10% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (ii) or (ix) above;
(xii) That portion of the aggregate Accounts of a
single customer that exceeds 15% of all Accounts of the
Borrower; provided, however, that such limitation shall not
apply to the Accounts of WCI, LLC, for which such limitation
shall be $250,000; and
(xiii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at
the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless
such consignee or bailee has executed an agreement with the
Lender;
(ii) Supplies, packaging, glue, scrap, maintenance
parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving
or not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
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(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant
to a license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory;
(viii) Inventory that is subject to a security
interest in favor of any Person other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section
5.12.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and recordkeeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
the Borrower's name, and the goodwill of the Borrower's business.
"Guarantor" means Xxxxx Xxxx.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
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whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Life Insurance Assignment" means an Assignment of Life
Insurance Policy as Collateral to be executed by the owner and the
beneficiary thereof, in form and substance satisfactory to the Lender,
granting the Lender a first priority lien on the Life Insurance Policy
to secure payment of the Obligations.
"Life Insurance Policy" has the meaning given in Section 6.11.
"Loan Documents" means this Agreement, the Notes and the
Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox and Collection Agreement
among the Borrower, Xxxxx Fargo, the Lender and Regulus West, LLC, of
even date herewith.
"Maturity Date" means April 30, 2002.
"Maximum Line" means $1,500,000, unless said amount is reduced
pursuant to Section 2.6, in which event it means the amount to which
said amount is reduced.
"Minimum Interest Charge" has the meaning given in Section
2.2(b).
"Net Income" means fiscal year-to-date before-tax net income
less extraordinary gains, as determined in accordance with GAAP.
"Note" means the Revolving Note.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
-6-
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, all indebtedness of the Borrower arising under this
Agreement, the Notes or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of
even date herewith.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in Exhibit C attached
hereto.
"Prime Rate" means the rate publicly announced from time to
time by Xxxxx Fargo as its "prime rate" or, if such bank ceases to
announce a rate so designated, any similar successor rate designated by
the Lender.
"Receivables" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently
transfers such person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
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"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the
sum of the Prime Rate plus two and one-half percent (2.5%), which
annual rate shall change when and as the Prime Rate changes.
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of
Exhibit A hereto and any note or notes issued in substitution therefor,
as the same may hereafter be amended, supplemented or restated from
time to time.
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, the Life Insurance
Assignment, the Patent and Trademark Security Agreement, and any other
document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, supplemented or
restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
"Xxxxx Fargo" means Xxxxx Fargo Bank, N.A.
-8-
Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
Amount and Terms of the Credit Facility
---------------------------------------
Section 2.1 Revolving Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied or waived in writing by the Lender (the "Funding
Date") to the Termination Date (the "Revolving Advances"). The Lender shall have
no obligation to make a Revolving Advance if, after giving effect to such
requested Revolving Advance, the sum of the outstanding and unpaid Revolving
Advances would exceed the Borrowing Base. The Borrower's obligation to pay the
Revolving Advances shall be evidenced by the Revolving Note and shall be secured
by the Collateral as provided in Article III. Within the limits set forth in
this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.6 and
reborrow. The Borrower agrees to comply with the following procedures in
requesting Revolving Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Denver time) of the day of the
requested Revolving Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Revolving Advance and
the amount thereof. Each request shall be by (i) any officer of the
Borrower; or (ii) any person designated as the Borrower's agent by any
officer of the Borrower in a writing delivered to the Lender; or (iii)
any person whom the Lender reasonably believes to be an officer of the
Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with Xxxxx Fargo unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon
the Lender's request, the Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
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Section 2.2 Interest; Minimum Interest Charge; Default
Interest; Usury.
(a) Revolving Note. Except as set forth in Section 2.2 (e),
the outstanding principal balance of the Revolving Note shall bear
interest at the Revolving Floating Rate. Interest accruing on the
Revolving Note shall be due and payable in arrears on the first day of
each month.
(b) Minimum Interest Charge. Notwithstanding the interest
payable pursuant to Section 2.2(a), the Borrower shall pay to the
Lender interest of not less than $20,000 per calendar quarter (the
"Minimum Interest Charge") during the term of this Agreement, and the
Borrower shall pay any deficiency between the Minimum Interest Charge
and the amount of interest otherwise calculated under Section 2.2(a) in
arrears in the manner provided in Section 2.4.
(c) Default Interest Rate. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(d) Participations. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower shall
be obligated to the Lender to pay the full amount of all interest
calculated under this Agreement, along with all other fees, charges and
other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a lower
rate than the Revolving Floating Rate or the Term Floating Rate, or
otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
(e) Usury. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary contained in
any Loan Document, all agreements which either now are or which shall
become agreements between the Borrower and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest
and other charges exceed the applicable limits imposed by any
applicable usury laws. If any payments in the nature of interest,
additional interest and other charges made under any Loan Document are
held to be in excess of the limits imposed by any applicable usury
laws, it is agreed that any such amount held to be in excess shall be
considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total
liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower
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and the Lender. This provision shall never be superseded or waived and
shall control every other provision of the Loan Documents and all
agreements between the Borrower and the Lender, or their successors and
assigns.
Section 2.3 Fees.
(a) Origination Fee. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $15,000,
due and payable upon the execution of this Agreement. The Lender
acknowledges receipt of $26,000 toward payment of this fee and the
fees, costs and expenses described in Sections 2.3(d) and 9.6.
(b) Unused Line Fee. For the purposes of this Section 2.3(b),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee
at the rate of one quarter percent (0.25%) per annum on the average
daily Unused Amount from the date of this Agreement to and including
the Termination Date, due and payable monthly in arrears on the first
day of the month and on the Termination Date.
(c) Facility Fee. The Borrower hereby agrees to pay to the
Lender an annual facility fee equal to one-quarter percent (0.25%) of
the Maximum Line, payable in arrears on each anniversary of this
Agreement and on the Termination Date.
(d) Audit Fees. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $60 per hour per auditor),
together with all actual out-of-pocket costs and expenses incurred in
conducting any such audit or inspection.
Section 2.4 Computation of Interest and Fees; When Interest
Due and Payable. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest shall
be payable in arrears on the first day of each month and on the Termination
Date.
Section 2.5 Capital Adequacy. If any Related Lender determines
at any time that its Return has been reduced as a result of any Rule Change,
such Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule Change. For
purposes of this Section 2.5:
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(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "Return", for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of
the Capital Adequacy Rules then in effect. Return may be calculated for
each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(c) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date
are scheduled to take place under the existing Capital Adequacy Rules
or any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
Related Lender.
(d) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.6 Voluntary Prepayment; Reduction of the Maximum
Line; Termination of the Credit Facility by the Borrower. Except as otherwise
provided herein, the Borrower may prepay the Revolving Advances in whole at any
time or from time to time in part. The Borrower may terminate the Credit
Facility or reduce the Maximum Line at any time if it (i) gives the Lender at
least 30 days' prior written notice and (ii) pays the Lender the termination or
line reduction fees in accordance with Section 2.7. Any reduction in the Maximum
Line must be in an amount not less than $100,000 or an integral multiple
thereof. If the Borrower reduces the Maximum Line to zero, all Obligations shall
be immediately due and payable. Upon termination of the Credit Facility and
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payment and performance of all Obligations, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
Section 2.7 Termination and Line Reduction Fees; Waiver of
Termination and Line Reduction Fees.
(a) Termination and Line Reduction Fees. If the Credit
Facility is terminated for any reason as of a date other than the
Maturity Date, or the Borrower reduces the Maximum Line, the Borrower
shall pay to the Lender a fee in an amount equal to a percentage of the
Maximum Line (or the reduction, as the case may be) as follows: (i)
three percent (3%) if the termination or reduction occurs on or before
the first anniversary of the Funding Date; (ii) two percent (2.0%) if
the termination or reduction occurs after the first anniversary of the
Funding Date but on or before the second anniversary of the Funding
Date; and (iii) one percent (1%) if the termination or reduction occurs
after the second anniversary of the Funding Date.
(b) Waiver of Termination, Line Reduction and Prepayment Fees.
The Borrower will not be required to pay the termination, line
reduction and prepayment fees otherwise due under this Section 2.7 if
such termination, line reduction or prepayment is made because of
refinancing of the Borrower by an affiliate of the Lender.
Section 2.8 Mandatory Prepayment. Without notice or demand, if
the outstanding principal balance of the Revolving Advances shall at any time
exceed the Borrowing Base, the Borrower shall immediately prepay the Revolving
Advances to the extent necessary to eliminate such excess. Any payment received
by the Lender under this Section 2.8 or under Section 2.6 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine.
Section 2.9 Payment. All payments to the Lender shall be made
in immediately available funds and shall be applied to the Obligations one
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower's request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make a Revolving Advance in an amount
equal to the portion of the Obligations from time to time due and payable.
Section 2.10 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
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Section 2.11 Use of Proceeds. The Borrower shall use the
proceeds of Advances for ordinary working capital purposes.
Section 2.12 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrower
unless the Borrower gives the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
------------------------------------
Section 3.1 Grant of Security Interest. The Borrower hereby
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
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now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License. Without limiting the generality of the
Patent Security Agreement, Copyright Security Agreement, Trademark Security
Agreement, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all trademarks, franchises,
trade names, copyrights and patents of the Borrower for the purpose of selling,
leasing or otherwise disposing of any or all Collateral during any Default
Period.
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
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financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
Naco Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Federal Tax Identification No. 00-0000000
Section 3.7 Setoff. The Borrower agrees that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrower by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed by such Person to the Borrower, whether or not due, and apply the same
to the payment of said participating interest, as fully as if such Person had
lent directly to the Borrower the amount of such participating interest.
ARTICLE IV
Conditions of Lending
---------------------
Section 4.1 Conditions Precedent to the Initial Revolving and
Term Advances. The Lender's obligation to make the initial Revolving and Term
Advances hereunder shall be subject to the condition precedent that the Lender
shall have received all of the following, each in form and substance
satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Notes, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to
which the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
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(d) A true and correct copy of any and all mortgages pursuant
to which the Borrower has mortgaged the Premises, together with a
mortgagee's disclaimer and consent with respect to each such mortgage.
(e) The Life Insurance Assignment, properly executed by the
beneficiary and owner thereof, and the Life Insurance Policy, each in
form and substance satisfactory to the Lender, together with such
evidence as the Lender may request that the Life Insurance Policy is
subject to no assignments or encumbrances other than the Life Insurance
Assignment.
(f) The Lockbox Agreement, properly executed by the Borrower,
Xxxxx Fargo and Regulus West, LLC.
(g) The Patent and Trademark Security Agreement, properly
executed by the Borrower.
(h) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against the Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(i) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) the Borrower's
articles of incorporation and bylaws, and (iii) the signatures of the
Borrower's officers or agents authorized to execute and deliver the
Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's behalf.
(j) A current certificate issued by the Secretary of State of
Utah, certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of Utah.
(k) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
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(l) A certificate of an officer of the Borrower confirming, in
his personal capacity, the representations and warranties set forth in
Article V.
(m) An opinion of counsel to the Borrower, addressed to the
Lender.
(n) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(o) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full
and prompt payment of all Obligations.
(p) A waiver of interest, properly executed by the spouse of
the Guarantor, waiving any and all interest such spouse may have in the
assets disclosed to the Lender in the financial statements of the
Guarantor and in any future earnings or assets acquired by the
Guarantor.
(q) An opinion of counsel to each Guarantor, addressed to the
Lender.
(r) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.3 and expenses incurred by the
Lender through such date and required to be paid by the Borrower under
Section 9.6, including all legal expenses incurred through the date of
this Agreement.
(s) Evidence of the commitment of Xxxx Bank to provide a term
loan to the Borrower, in the amount of $1,100,000, secured by certain
equipment and real estate of the Borrower.
(t) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
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ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number.
The Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Utah and is duly licensed or qualified
to transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary. The Borrower has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 hereto. The Borrower's chief
executive office and principal place of business is located at the address set
forth in Schedule 5.1 hereto, and all of the Borrower's records relating to its
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set forth
in Schedule 5.1 hereto. The Borrower's tax identification number is correctly
set forth in Section 3.6 hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by the Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 5.3 Legal Agreements. This Agreement constitutes and,
upon due execution by the Borrower, the other Loan Documents will constitute the
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legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
Section 5.4 Subsidiaries. Except as set forth in Schedule 5.4
hereto, the Borrower has no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. The
Borrower has heretofore furnished to the Lender its audited financial statements
for its fiscal year ended November 30, 1998 and those statements fairly present
the Borrower's financial condition on the dates thereof and the results of its
operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principles. Since the date of the
most recent financial statements, there has been no material adverse change in
the Borrower's business, properties or condition (financial or otherwise).
Section 5.6 Litigation. There are no actions, suits or
proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any of its Affiliates or the properties of the
Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
Section 5.7 Regulation U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrower and its Affiliates have paid
or caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may be,
are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 Titles and Liens. The Borrower has good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 5.5 and all proceeds thereof,
free and clear of all mortgages, security interests, liens and encumbrances,
except for Permitted Liens. No financing statement naming the Borrower as debtor
is on file in any office except to perfect only Permitted Liens.
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Section 5.10 Plans. Except as disclosed to the Lender in
writing prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any Affiliate has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither the Borrower nor
any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which are or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 Default. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the
Borrower or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
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(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrower, alleging liability under, violation of, or noncompliance with
any Environmental Law or any license, permit or other authorization
issued pursuant thereto. To the Borrower's best knowledge, no such
matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrower's possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's
businesses.
Section 5.13 Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrower has provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
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Section 5.15 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 Financial Solvency. Both before and after giving
effect to all of the transactions contemplated in the Loan Documents, none of
the Borrower or its Affiliates:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of
the Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to, nor believes
that it will, incur debts beyond its ability to pay them as they
mature;
(d) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to hinder, delay or
defraud either its present or future creditors; and
(e) this time contemplates filing a petition in bankruptcy or
for an arrangement or reorganization or similar proceeding under any
law any jurisdiction, nor, to the best knowledge of the Borrower, is
the subject of any actual, pending or threatened bankruptcy, insolvency
or similar proceedings under any law of any jurisdiction.
ARTICLE VI
Borrower's Affirmative Covenants
--------------------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
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Section 6.1 Reporting Requirements. The Borrower will deliver,
or cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, the Borrower's
financial statements reviewed (or, for any year during which the
Borrower's net sales exceeded $10,000,000, audited) by independent
certified public accountants selected by the Borrower and acceptable to
the Lender, which annual financial statements shall include the
Borrower's balance sheet as at the end of such fiscal year and the
related statements of the Borrower's income, retained earnings and cash
flows for the fiscal year then ended, prepared, if the Lender so
requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants, and (ii) a certificate of the Borrower's chief
financial officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has
knowledge of the occurrence of any Default or Event of Default
hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the
end of and for such month and for the year to date period then ended,
prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrower's chief financial officer, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections
6.13, 6.14 and 7.10;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable, an inventory certification report,
and a calculation of the Borrower's Accounts, Eligible Accounts,
Inventory and Eligible Inventory as at the end of such month or shorter
time period;
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(d) at least 30 days before the beginning of each fiscal year
of the Borrower, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the
Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as
the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against the
Borrower in excess of $50,000;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event;
(g) as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Borrower's chief financial
officer setting forth details as to such failure and the action which
the Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers; (ii) credit memos;
(iii) any goods returned to or recovered by the Borrower; and (iv) any
change in the persons constituting the Borrower's officers and
directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
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Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) as soon as possible, and in any event by not later than
April 30th of each year, copies of the state and federal tax returns
and all schedules thereto and an updated personal financial statement
of each Guarantor;
(n) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(o) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices in excess of $5,000 to account debtors,
shipment documents and delivery receipts for goods sold in excess of
$5,000, and such other material, reports, records or information as the
Lender may request.
Section 6.2 Books and Records; Inspection and Examination. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send or require the Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
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Section 6.4 Compliance with Laws.
(a) Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrower
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that the Borrower shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
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Section 6.7 Insurance. The Borrower will obtain and at all
times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times maintain business interruption insurance including
coverage for force majeure and keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
Section 6.8 Preservation of Existence. The Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrower.
Section 6.10 Collateral Account; Lockbox.
(a) The Borrower shall irrevocably direct all present and
future Account debtors and other Persons obligated to make payments
constituting Collateral to make such payments directly to the Lockbox.
All of the Borrower's invoices, account statements and other written or
oral communications directing, instructing, demanding or requesting
payment of any Account or any other amount constituting Collateral
shall conspicuously direct that all payments be made to the Lockbox and
shall include the Lockbox address. All payments received in the Lockbox
shall be processed to the Collateral Account.
(b) The Borrower agrees to deposit in the Collateral Account
or, at the Lender's option, to deliver to the Lender all collections on
Accounts, contract rights, chattel paper and other rights to payment
constituting Collateral, and all other cash proceeds of Collateral,
which the Borrower may receive directly notwithstanding its direction
to Account debtors and other obligors to make payments to the Lockbox,
immediately upon receipt thereof, in the form received, except for the
Borrower's endorsement when deemed necessary. Until delivered to the
Lender or deposited in the Collateral Account, all proceeds or
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collections of Collateral shall be held in trust by the Borrower for
and as the property of the Lender and shall not be commingled with any
funds or property of the Borrower.
(c) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(d) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion may, after
allowing one Banking Day, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to
the Lender's general account.
(e) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay the Lender, or, for items deposited in
the Collateral Account, the bank maintaining such account, the amount
of that item, or such bank at its discretion may charge any uncollected
item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the Borrower.
Section 6.11 Key Person Life Insurance. The Borrower shall
maintain insurance upon the life of Xxxxx Xxxx, its President, with the death
benefit thereunder in an amount not less than $250,000 (the "Life Insurance
Policy"). The right to receive the proceeds of the Life Insurance Policy shall
be assigned to the Lender by the Life Insurance Assignment.
Section 6.12 Performance by the Lender. If the Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5, 6.7 and
6.10, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
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incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.12.
Section 6.13 Minimum Book Net Worth. The Borrower will
maintain, as of each date described below, its Book Net Worth at an amount not
less than the amount set forth opposite such period:
Period Minimum Book Net Worth
------ ----------------------
February 28, 1999 $649,000
May 31, 1999 $878,000
August 31, 1999 $1,061,000
November 30, 1999 and
on the last day of each
quarter thereafter $1,281,000
Section 6.14 Minimum Net Income. The Borrower will achieve as
of each date described below, cumulative Net Income of not less than the amount
set forth opposite such period:
Period Minimum YTD Net Income
------ ----------------------
February 28, 1999 $(295,000)
March 31, 1999 $(275,000)
April 30, 1999 $(165,000)
May 31, 1999 $(75,000)
June 30, 1999 $30,000
July 31, 1999 $20,000
August 31, 1999 $145,000
September 30, 1999 $170,000
October 31, 1999 $255,000
November 30, 1999 $365,000
Section 6.15 New Covenants. On or before October 31, 1999, the
Borrower and the Lender shall agree on new covenant levels for Sections 6.13,
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6.14 and 7.10 for periods after November 30, 1999. The new covenant levels will
be based on the Borrower's projections for such periods and shall be no less
stringent than the present levels.
ARTICLE VII
Negative Covenants
------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 Liens. The Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the lesser of cost or fair market value thereof and so long as no
Default Period is then in existence and none would exist immediately
after such acquisition.
Section 7.2 Indebtedness. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
SL 605.3 57131 00596
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(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 Guaranties. The Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 Investments and Subsidiaries.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Xxxxx'x Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $25,000; and
(iii) advances in the form of progress payments,
prepaid rent not exceeding twelve months or security deposits.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date hereof
and listed in Schedule 5.4.
Section 7.5 Dividends. Except as set forth below, the Borrower
will not declare or pay any dividends (other than dividends payable solely in
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stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 7.8 Sale and Leaseback. The Borrower will not enter
into any arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now owned
or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrower intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 Restrictions on Nature of Business. The Borrower
will not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 Capital Expenditures. The Borrower will not incur
or contract to incur Capital Expenditures of more than $200,000 in the aggregate
during its fiscal year ending November 30, 1999.
Section 7.11 Accounting. The Borrower will not adopt any
material change in accounting principles other than as required by GAAP. The
Borrower will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 Discounts, etc. The Borrower will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrower or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the Borrower.
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Section 7.13 Defined Benefit Pension Plans. The Borrower will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 Other Defaults. The Borrower will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 Place of Business; Name. The Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.16 Organizational Documents; S Corporation Status.
The Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower will not become an S Corporation within
the meaning of the Internal Revenue Code of 1986, as amended.
Section 7.17 Salaries. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% in any one year, either individually or for all
such persons in the aggregate, or pay any such increase from any source other
than profits earned in the year of payment.
Section 7.18 Change in Ownership. The Borrower will not issue
or sell any stock of the Borrower so as to change the percentage of voting and
non-voting stock owned by each of the Borrower's shareholders, and the Borrower
will not permit or suffer to occur the sale, transfer, assignment, pledge or
other disposition of any or all of the issued and outstanding shares of stock of
the Borrower.
ARTICLE VIII
Events of Default, Rights and Remedies
--------------------------------------
Section 8.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become
due and payable;
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(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(d) The Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his
debts as they mature, or make an assignment for the benefit of
creditors; or the Borrower or any Guarantor shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or him or for all or any substantial part of its or his property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of the Borrower or such Guarantor, as the
case may be; or the Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Borrower
or any such Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any Guarantor;
(e) A petition shall be filed by or against the Borrower or
any Guarantor under the United States Bankruptcy Code naming the
Borrower or such Guarantor as debtor;
(f) The Life Insurance Policy shall be terminated, by the
Borrower or otherwise; or the Life Insurance Policy shall be scheduled
to terminate within 30 days and the Borrower shall not have delivered a
satisfactory renewal thereof to the Lender; or the Borrower shall fail
to pay any premium on the Life Insurance Policy when due; or the
Borrower shall take any other action that impairs the value of the Life
Insurance Policy.
(g) Any representation or warranty made by the Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(h) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of $25,000 and the
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continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(i) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
the Borrower by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
(k) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrower hereunder or under any note;
(l) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(m) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(n) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
-36-
(o) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's
guaranty in favor of the Lender, any individual Guarantor shall die or
any other Guarantor shall cease to exist;
(p) The Borrower shall take or participate in any action which
would be prohibited under the provisions of any Subordination Agreement
or make any payment on the Subordinated Indebtedness (as defined in the
Subordination Agreement) that any Person was not entitled to receive
under the provisions of the Subordination Agreement;
(q) Any event or circumstance with respect to the Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by the Borrower under the Loan Documents is impaired or any
material adverse change in the business or financial condition of the
Borrower shall occur.
(r) There shall occur any breach, default or event of default
by or attributable to any Affiliate under any agreement between such
Affiliate and the Lender.
Section 8.2 Rights and Remedies. During any Default Period,
the Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrower will on demand assemble the
-37-
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
-------------
Section 9.1 No Waiver; Cumulative Remedies. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.2 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
-38-
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrower:
Naco Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxx
If to the Lender:
Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxx Xxxxxxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.4 Further Documents. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 9.5 Collateral. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
-39-
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.6 Costs and Expenses. The Borrower agrees to pay on
demand all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.7 Indemnity. In addition to the payment of expenses
pursuant to Section 9.6, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the
Advances;
(b) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12
proves to be incorrect in any respect or as a result of any violation
of the covenant contained in Section 6.4(b); and
(c) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether or
not such Indemnitee shall be designated a party thereto, which may be
imposed on, incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the making of
the Advances and the Loan Documents or the use or intended use of the
proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
-40-
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 9.8 Participants. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.9 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.10 Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrower and its Affiliates, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.
Section 9.11 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
-41-
Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Colorado.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court for the City and County
of Denver, Colorado, or the United States District Court, District of Colorado;
and (iv) agree that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
XXXXX FARGO BUSINESS CREDIT,
INC., f/k/a Norwest Business Credit, Inc.
By:/s/Xxxxxxx Xxxxx
-------------------
Xxxxxxx Xxxxx
Its Vice President
NACO INDUSTRIES, INC.
By:/s/Xxxxx Xxxx
----------------
Xxxxx Xxxx
Its President
-1-
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
----------------------------------
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and
Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
-2-
Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$1,500,000 Denver, Colorado
April 22, 1999
For value received, the undersigned, Naco Industries, Inc., a Utah
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of NORWEST BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Denver, Colorado, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000) or, if less, the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
NACO INDUSTRIES, INC.
By/s/Xxxxx Xxxx
---------------
Xxxxx Xxxx
Its President
A-1
Exhibit B to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: Xxxxxxxx Xxxxxxxxxx
Xxxxx Fargo Business Credit, Inc.
Date: __________________, ______
Subject: Naco Industries, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as
of April 22, 1999 (the "Credit Agreement"), attached are the financial
statements of Naco Industries, Inc. (the "Borrower") as of and for
________________, 19___ (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition and the results of its operations as of the
date thereof.
Events of Default. (Check one):
-----------------
o The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the
Credit Agreement.
o The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit
Agreement and attached hereto is a statement of the
facts with respect to thereto.
I hereby certify to the Lender as follows:
o The Reporting Date does not xxxx the end of one of
the Borrower's fiscal quarters, hence I am completing
only paragraph __ below.
o The Reporting Date marks the end of one of the
Borrower's fiscal quarters, hence I am completing all
paragraphs below except paragraph __.
o The Reporting Date marks the end of the Borrower's
fiscal year, hence I am completing all paragraphs
below.
B-1
Financial Covenants. I further hereby certify as follows:
-------------------
1. Minimum Book Net Worth. Pursuant to Section 6.13 of the
Credit Agreement, as of the Reporting Date, the Borrower's Book Net
Worth was $____________ which o satisfies o does not satisfy the
requirement that such amount be not less than $_____________ on the
Reporting Date as set forth in table below:
Period Minimum Book Net Worth
------ ----------------------
February 28, 1999 $649,000
May 31, 1999 $878,000
August 31, 1999 $1,061,000
November 30, 1999 $1,281,000
2. Minimum Net Income. Pursuant to Section 6.14 of the Credit
Agreement, the Borrower's Net Income as of the Reporting Date, was
$____________, which o satisfies o does not satisfy the requirement
that such amount be not less than $_____________ on the Reporting Date
as set forth in table below:
Period Minimum YTD Net Income
------ ----------------------
February 28, 1999 $(295,000)
March 31, 1999 $(275,000)
April 30, 1999 $(165,000)
May 31, 1999 $(75,000)
June 30, 1999 $30,000
July 31, 1999 $20,000
August 31, 1999 $145,000
September 30, 1999 $170,000
October 31, 1999 $255,000
November 30, 1999 $365,000
3. Capital Expenditures. Pursuant to Section 7.10 of the
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrower has expended or contracted to expend during the
fiscal year ended November 30, _____, for Capital Expenditures,
$__________________ in the aggregate, which o satisfies o does not
satisfy the requirement that such expenditures not exceed $__________
in the aggregate and $___________ for any one transaction during such
year.
B-2
4. Salaries. As of the Reporting Date, the Borrower o is o is
not in compliance with Section 7.17 of the Credit Agreement concerning
salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
NACO INDUSTRIES, INC.
By:
Its Chief Financial Officer
B-3
Exhibit C to Credit and Security
Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement
are legally described as follows:
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxx 00000
000 Xxxx 00xx Xxxxxx
Xxxxx, Xxxx 00000
D-1
Schedule 5.1 to Credit and Security
Agreement
Trade Names, Chief Executive Office, Principal Place of Business, and Locations
-------------------------------------------------------------------------------
of Collateral
-------------
Trade Names
-----------
NACO Industries, Inc.
NACO West
Valor Division
NACO Composites, Inc.
Chief Executive Office/Principal Place of Business
--------------------------------------------------
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
Other Inventory and Equipment Locations
---------------------------------------
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxx 00000
000 Xxxx 00xx Xxxxxx
Xxxxx, Xxxx 00000
0000 Xxxxxx Xxxxxx
Xxxx, Xxxxxxxxxx 00000
Schedule 5.4 to Credit and Security
Agreement
Subsidiaries
------------
None
Schedule 7.1 to Credit and Security
Agreement
Permitted Liens
---------------
Creditor Collateral Jurisdiction Filing Date Filing No.
-------- ---------- ------------ ----------- ----------
Yale Financial Services Equipment Kansas - SOS 02/21/97 2327631
Yale Financial Services Equipment Utah - SOS 02/21/97 97-555326
Colonial Pacific Leasing Equipment California - SOS 06/06/95 9515960914
Colonial Pacific Leasing Equipment Kansas - SOS 05/22/95 2140381
Schedule 7.2 to Credit and Security Agreement
Permitted Indebtedness and Guaranties
-------------------------------------
Indebtedness
------------
Creditor Principal Maturity Monthly Collateral
-------- --------- -------- ------- ----------
Amount Date Payment
------ ---- -------
Western Forklift & Supply 8,552.13 03/18/2002 276.00 1 used Xxxxx Forklift Model GCS 17 SN#
G127-0127-8203
GE Capital / Colonial Pacific 61,186.22 11/19/2003 1,561.74 1 Xxxxxx 100-ton molding clamp
Leasing
GE Capital / Balboa Capital 63,993.61 12/12/2001 2,795.15 1 Used Battenfeld RIM Molding Machine
including press and urethane pumping
system
First Security Bank 9,586.74 04/01/2001 466.52 1 1996 Chev. X0000 Xxxxxx XX
0XXXX00X0XX000000
Zions Bank 15,182.15 01/17/2003 377.94 1 Used 1995 Chevrolet 4x4 0000 Xxxxxx
XX# XXXX00X0XX000000
First Security Bank 2298.05 07/05/1999 472.03 94 GMC Safari Van SN
GKEL19W5RB554795
First Security Bank 2047.65 07/05/1999 418.29 94 GMC Model TC10953
0XXXX00XXXX000000 1/2 Pickup
First Security Bank 2293.60 12/29/1999 244.93 Used 92 Chev. SN 0XXXX00X0XX000000
Yale Financial Services, Inc. Operating 08/30/2001 341.00 New Yale Forklift GLP050
WebBank Corporation 1,100,000 04/22/2014 11,653.01 Equipment
(adj. int. rate)
Guaranties
----------
Primary Obligor Amount and Description of Beneficiary of Guaranty
--------------- ------------------------- -----------------------
Obligation Guaranteed
---------------------
USU Credit Union $240,000 Building Mortgage PVC Inc.
FORM OF LEGAL OPINION
February ___, 1999
TO: Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxxxxx
Re: Naco Industries, Inc. (the "Borrower")
Ladies and Gentlemen:
We are general counsel for and have represented the Borrower
in connection with the execution and delivery to you of the following documents,
each dated as of February ___, 1999 (the "Documents"):
(a) Credit and Security Agreement between you and the
Borrower.
(b) The other Loan Documents (as defined in said Credit and
Security Agreement).
Capitalized terms used in this letter but not defined herein shall have the
meanings given to them in the Credit and Security Agreement.
We have also acted as counsel for Xxxxx Xxxx (the "Individual
Guarantor") in connection with the execution by the Individual Guarantor and
delivery to you of the Individual Guarantor's Guaranty dated as of February ___,
1999.
In so acting, we have examined copies of the Documents
executed by the Borrower and the Individual Guarantor's Guaranty, we have
reviewed the articles of incorporation and bylaws of the Borrower and pertinent
indentures and agreements, known to us, binding upon the Borrower and the
Individual Guarantor, we have supervised the necessary corporate action to
authorize the Documents, and we have reviewed such matters of law and made
inquiry into such matters of fact as we have considered appropriate for purposes
of rendering this opinion to you.
Based upon the foregoing, it is our opinion that:
1. The Borrower is a business corporation, duly organized,
validly existing and in good standing under the laws of the State of Utah, and
is duly licensed or qualified to transact business in all jurisdictions where
the character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary. It has all
requisite power and authority, corporate or otherwise, to conduct its business
and to own its properties. The name of the Borrower set forth above is now, and
has been at all times since its incorporation, its correct corporate name.
2. The Borrower is duly authorized and empowered to execute,
deliver and perform the Documents and to borrow money from you.
3. The execution, delivery and performance of the Documents,
and the performance by the Borrower of its obligations thereunder, do not and
will not violate or conflict with any provision of law or the articles of
incorporation or bylaws of the Borrower and do not and will not violate or
conflict with, or cause any default or event of default to occur under, any
agreement presently binding upon the Borrower.
4. The execution and delivery of the Documents have been duly
approved by all necessary action of the directors and shareholders of the
Borrower; and the Documents have been duly executed and delivered by the
Borrower and constitute its lawful and binding obligations, legally enforceable
against it in accordance with their respective terms (subject to laws generally
affecting the enforcement of creditors' rights).
5. To the best of our knowledge, no litigation, tax claims or
governmental proceedings are pending or are threatened against the Borrower or
the Individual Guarantor and no judgment or order of any court or administrative
agency is outstanding against the Borrower or the Individual Guarantor.
6. The transaction evidenced by the Documents does not violate
any law pertaining to usury or the payment of interest on loans.
7. The authorization, execution, delivery and performance of
the Documents are not and will not be subject to the jurisdiction, approval or
consent of, or to any requirement of registration with or notification to, any
federal, state or local regulatory body or administrative agency.
8. The proper place to file financing statements to perfect
the security interests created by said Credit and Security Agreement is the
office of the Secretary of State of the states of Utah, California and Kansas.
The financing statements signed by the Borrower are sufficient in form to
perfect, when so filed, the Security Interest to the extent such security
interests are capable of being perfected by filing.
9. The Individual Guarantor's guaranty has been duly and
validly executed and delivered by the Individual Guarantor and constitutes the
legal, valid and binding agreement of the Individual Guarantor, enforceable in
accordance with its terms, except to the extent that enforcement thereof may be
limited by any applicable bankruptcy, insolvency or similar laws now or
hereafter in effect affecting creditors' rights generally.
Very truly yours,
